The Trump administration called for an overhaul of the tax code on April 26. In a one-page outline, Mr. Trump proposed to replace the seven income tax brackets with three new ones, cut the corporate tax rate by more than 50%, abolish the alternative-minimum tax and estate tax, and nearly double the standard deduction - from $12,600 to $24,000 for married couples. The plan fails to reform the mortgage interest deduction (MID), but the dramatic increase in the standard deduction would make the MID irrelevant except for those with the highest incomes.
The administration’s tax proposal would lower the corporate tax rate from 35% to 15% and establish three tax rates for individuals at 10%, 25% and 35%, but it did not establish what incomes would fall into each bracket. Administration officials did not address how much the plan would reduce federal revenue or grow the debt, but the Committee for a Responsible Federal Budget estimates that the plan would lead to a loss in government revenue of roughly $5.5 trillion over 10 years.
“This is about economic growth, job creation, America first, and that’s what [Mr. Trump] cares about,” White House National Economic Council Director Gary Cohn said. “Our tax plan is a big leg of that stool.”
House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), House Ways and Means Committee Chairman Kevin Brady (R-TX), and Senate Finance Committee Chairman Orrin Hatch (R-UT) issued a joint statement that said in part: “The principles outlined by the Trump Administration today will serve as critical guideposts for Congress and the Administration as we work together to overhaul the American tax system and ensure middle-class families and job creators are better positioned for the 21st century economy.”
Democrats on Capitol Hill panned the proposal. House Minority Leader Nancy Pelosi (D-CA) called the plan a "wish list for billionaires." "The same Trickle Down Economics that undermined the middle class are alive and well in the President’s tax plan," she said in a statement. "True to form, President Trump’s tax plan is short on details and long on giveaways to big corporations and billionaires."
White House officials indicated that if Democrats oppose the plan, Congress could resort to using the reconciliation process to pass legislation through the Senate with a simple majority vote. Doing so, however, would limit the changes to ten years rather than making them permanent.
NLIHC released a press statement criticizing the Trump tax reform proposal for missing an opportunity to rebalance federal housing policy to help more everyday people – both homeowners and renters – afford a place to call home. “If Mr. Trump is serious about putting forward tax reform proposals to spur economic growth and help everyday Americans who have been left behind, he has sorely missed the mark,” said NLIHC President and CEO Diane Yentel.
The NLIHC-led United for Homes campaign calls on the president and Congress to embrace smart reforms to the MID. These include reducing the amount of a mortgage eligible for a tax break from $1 million to $500,000—impacting fewer than 6 percent of mortgage holders nationally—and converting the deduction into a credit, which would create a new tax break for 15 million low and moderate income homeowners who currently do not benefit from the MID. These changes would result in $241 billion in savings over 10 years to be reinvested into critical rental housing solutions, like the national Housing Trust Fund and rental assistance, for families with the greatest needs.
Instead of embracing the UFH campaign reforms to MID – a $70 billion tax write-off that largely benefits higher income households – to provide tax relief to millions of lower income homeowners, the Trump tax plan would make the MID even more regressive, benefitting only the wealthiest Americans. Rather than reinvesting the savings from MID reform to help our nation’s most vulnerable renters who struggle to pay their rent each month, the tax plan uses housing dollars to pay for lowering tax rates for millionaires, billionaires and corporations.
Learn more about the United for Homes campaign at: www.unitedforhomes.org